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Carry forward of looses of a unit sold as slump Sale

Anurag Sharma (Service) (65 Points)

22 June 2010

How will the business losses of a unit / business sold as slump sale, be treated in the books of the company? Will such business losses will be available to be set off against other business profits in subsequent years or unabsorbed accumulated losses of the slump sale unit gets transferred to the new company and available for set off, or on sale of such unit, the related accumulated business loss get extinguished ? Please clarify?

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2 Replies

Amir (Learner) (4016 Points)
Replied 22 June 2010

Hi Sir,

Losses of an undertaking are not transferred to the buyer except in case of amalgamation, demerger & conversion of partnership/properietory firm into a limited company. (Sec 72A, 72AA & 72AB)

Slump sale is not covered and hence seller of the undertaking is entitled to utilise the losses of the transferred undertaking.

Attention is invited to the fact that existence of a business (in the year of set off) is not a condition to set off the losses occured in the business. i:e lossess of closed businesses can be carried forward & set off.

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